Market Report: Banks rebound after Black Monday knock

On the up: Barclays and Lloyds were among the gainers on the FTSE 100 today Joe Giddens/PA

Banking stocks rebounded after “Black Monday” with Investec advising clients to close their short positions in Barclays.

Investec’s banking guru Ian Gordon suggested the falls from the High Street bank, up 10.7p at 255.7p, and rival lender Lloyds, up 3.56p at 77.03p, were overcooked and upgraded his recommendations to Buy.

Gordon sees some justification for Barclays’ share price slump, explaining that the City was a bit too excited by executive chairman John McFarlane’s move to oust chief executive Antony Jenkins.

“Not since the halcyon days of Bob Diamond had investors apparently been willing to put so much faith in one man,” he said.

The tipster added that he has no intention of joining the growing ranks of the Lloyds “100 club” — analysts with target prices north of 100p, a level not seen since before the financial crash — and stuck by his 86p goal.

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There was relief among City investors as the FTSE 100 stopped the rot after its longest losing streak since 2003. The benchmark index recovered 142.77 points or 2.4% to 6041.64 as traders shrugged off more heavy falls from China’s Shanghai Composite index.

Mike McCudden at Interactive Investor warned: “China is still under severe pressure and with talk that the US may still raise rates this year, investors could be in for a rude awakening.”

Dairy Crest, the maker of Cathedral City cheese and Country Life butter, was 12.17p sweeter at 580.17p after Jefferies raised its target price to 640p.

Dairy Crest is selling its milk business to Müller

Analyst Martin Deboo said the sale of its milk business to Müller will make the company “a more biddable entity”, adding that its £45 million push into protein shakes will strengthen profits.

Shares in Home Retail Group fell 3.2p to 146.4p as Barclays cut its rating to underweight on the prospect of the new living wage for staff at Argos.

Its analysts feel the company won’t be able to bump up prices to offset higher wages given its main appeal is offering cheaper goods.